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Monday, July 16, 2012

Older, wiser, better: ageing workforce and fast-track societies

by Julie Harris,Consultant, Directorate for Education

Simple fact: older workers are leaving the labour force earlier than they did in the 60s and 70s. The retirement age declined steadily across OECD countries from the 1970s to the early 2000s. Over the past decade this drop has levelled off, with some countries experiencing a slight upturn. Despite this, apart from Japan and Korea, it is still significantly lower than in the 1960s and 1970s.

At the same time retirement age has been declining, life expectancy has been increasing. In many OECD countries, workers who retire can expect to live another two decades.

If this situation does not change, there will be twice the number of retirees per worker in OECD countries by 2050. You don't need to be an economist to understand that such an eventuality would pose a serious threat to living standards and tear deeply into the fabric of the social safety net.

So, what to do? How can governments move to remedy this situation? And what can companies do to better take advantage of senior employees' skills?

The OECD Skills Strategy states that both governments and companies should work to discourage early retirement. To keep older workers in the labour market, many countries have eliminated early retirement schemes, increased the official pensionable age and corrected distorted financial incentives to retire early. To tackle demand-side barriers to employing older workers, some countries have tried to balance labour costs with productivity by reducing employers’ social security contributions or providing wage subsidies for older workers. Lifelong learning and targeted training, especially in mid-career, can improve employability in later life as well and discourage early withdrawal from the labour market. A rise in the pensionable age also lengthens the period of time over which employers could recover training costs; hence, an attractive incentive to motivate more employers and older employees to invest in training.

Anne-Sophie Parent, Secretary General of AGE Platform Europe, an NGO that promotes the interests of people over 50 across Europe, is convinced that scrapping the mandatory retirement age is key to increasing the employability of older workers. This fixed age, she explains, is like the expiry date on a pot of yoghurt: the closer it gets, the more you're inclined to think of it as no good.

According to the OECD, employees between 25 and 54 are twice as likely to take part in job training as those over 55, confirming employers’ unwillingness to invest in senior staff. Removing the mandatory age would help make employers see older employees as valuable, she argues, giving them an incentive to invest in their skills through training.

Participation in job-related training over the last month, by age group, 2009 (As a percentage of the employed in the age group)

If doing away with the mandatory age is crucial, governments must also address certain significant workplace problems to help older workers get a foothold in the job market. Rodolphe Delacroix, Senior Consultant at consulting firm Towers Watson, cites the case of Finland, which pushed back the average retirement age three years by tackling work-related stress, strenuousness of work and work-life balance.

Delacroix adds that governments can use social and fiscal incentives to entice companies to hire people over 50 and set up progressive retirement plans that allow older employees to reduce their working hours over a number of years. These could replace early retirement plans, which have been the norm in countries such as France.

Companies, for their part, must make career planning an integral part of their human resources policy early on, he maintains. They need to manage the end of employees' careers well to ensure that knowledge and skills are passed on to younger employees.

Older workers are perfectly positioned to help countries maximise the use of skills, as outlined in the OECD Skills Strategy. They can develop relevant skills of younger workers, supply their skills to the labour market and put them to effective use. Indeed, it is hard to imagine how they can't be a boon to our crisis-ridden economies.